Philanthropy carries a whiff of scandal

Colleges feel awkward when donors run afoul of the law

It's hard not to like an alum who's so wildly successful he can pledge millions for campus construction and entice world-renowned musicians to perform for his small-town alma mater.

Alberto Vilar, a 1962 graduate of Washington and Jefferson College, did exactly those things. As an investment wizard, a global patron of the arts and a college trustee, Vilar became a deep-pocketed symbol of campus pride as visible as the Vilar Technology Center, so named in 1999 for his $18.1 million pledge, the largest in the college's history.

But Vilar, 64, spent last week in a New York jail, accused by the federal government of defrauding an investor of $5 million, including $540,000 he is alleged to have diverted to Washington and Jefferson. Suddenly, a place that benefited from his largesse found itself an unwitting example of a phenomenon discomfiting a growing number of college campuses nationwide.

A recent string of corporate corruption cases, ensnaring the likes of Enron, Tyco, WorldCom and lesser-known names, is leaving some schools uneasily tied to prominent donors who now stand accused or convicted of wrongdoing. Many campuses take a wait-and-see attitude while accusations unfold, and officials at Washington and Jefferson say it's way too early in Vilar's case to draw conclusions about a man listed on the campus Web site as one of the most notable to have studied at the 224-year-old school.

Usually, gifts made by embattled donors aren't directly linked to alleged misdeeds. So the problem facing a campus generally is limited to an awkward name association, like the still-vacant Kenneth L. Lay professorship in economics at the University of Missouri at Columbia. It is named for the former Enron Corp. chairman whose foundation donated $1.1 million to the school before the company's spectacular collapse.

Sometimes, though, schools end up giving the money back.

The University of Oregon Foundation repaid $850,000 in 2001 and removed alumnus Jeff Grayson's name from a campus building after a court-appointed receiver sought the gift's return. The investment firm headed by Grayson, caught up in a criminal investigation, paid the money toward a $1.5 million pledge, even though the firm was insolvent, school officials said.

"Returning the gift is the right thing to do under the circumstances," foundation President Vinton "Slim" Sommerville said in announcing the move. "We accepted the money in good faith on behalf of the university."

Likewise, the University of Michigan wrote a $20,000 check to the U.S. Treasury in 2003 to repay a donor's gift toward a football scholarship. The U.S. attorney's office said the money was supposed to be frozen as part of an indictment, school spokeswoman Julie Peterson said.

At Washington and Jefferson, officials say they were stunned by word of Vilar's May 26 arrest and know only what has been reported in the news media. "It is premature for the college to discuss any hypothetical questions about what we might do in the future regarding this situation," a statement issued by school spokeswoman Lynn Barger said.

Vilar's attorney has proclaimed his client's innocence, and the 1,350-student campus where he's been a trustee for seven years isn't rushing to judgment.

"I don't think we've heard any of Mr. Vilar's side of the story," Robert Shust, chairman of Washington and Jefferson's board of trustees, said in a phone interview. "He's a valued alumnus. That's as far as I can go."

Vilar, a founder of Amerindo Investment Advisors Inc., has been ranked among Forbes magazines's 400 richest people. He has a reputation for being a sharp-eyed portfolio manager whose fortunes soared and plunged with the technology stocks that helped make him rich.

He is accused in a federal complaint of diverting funds from an unnamed investor and using them "as a personal piggybank" to further his philanthropy and to cover expenses ranging from catering to dishwasher repair. At a hearing in New York City on Friday, a federal judge reduced Vilar's $10 million bail to $4 million in assets, and his attorney Susan Necheles said he could be released from jail by mid-week.

In the complaint unsealed in New York City the day after Vilar's arrest at Newark Liberty International Airport, the government put his worth at $950 million. It estimated that Vilar made more than $200 million in contributions to opera companies around the world, medical institutions and other organizations.

He's yet to fulfill some of those pledges.

Vilar's $18.1 million promise to Washington and Jefferson for the Vilar Center "is still outstanding," according to the college's statement. School officials won't say what share was paid.

The four-story Gothic granite building opened on the Washington, Pa., campus in fall 2003, but there is no timetable to finish the building's upper two floors. As of yet, there is no sign with Vilar's name on the building.

A distinguished artists series at Washington and Jefferson supported by an unspecified pledge from Vilar went on hiatus in 2003 after three years. It brought to campus performers including soprano Jessye Norman; the Kirov Orchestra, under the baton of Valery Gergiev; and the Bavarian Radio Symphony Orchestra, conducted by Lorin Maazel.

Washington and Jefferson isn't the only school that has waited on a Vilar pledge.

New York University announced a "Rhodes Scholar-like" global fellows program in the performing arts in 2001 after he pledged a $23 million gift to the school. But it later discontinued the program when the gift, to be paid in installments, did not arrive.

"We remained in conversations with Mr. Vilar, but ultimately concluded that no money would be forthcoming," spokesman John Beckman said.

In 2001, Vilar pledged $10 million toward neurological surgery at Columbia University Medical Center in New York City. Officials there said Friday that no money has yet been paid.

Nationwide, gifts tarnished by scandal represent a tiny share of campus philanthropy, but the dollar total is rising. In 2003, The Chronicle of Higher Education estimated that campuses had received more than $100 million from firms or individuals investigated, accused or convicted of white-collar swindling.

By and large, schools are innocent bystanders, not in a position to know about hidden donor transgressions, said Sheldon Steinbach, general counsel for the Washington, D.C-based American Council on Education, which represents colleges and universities. And the gifts, often made by a donor in good faith long before trouble arises, are no less beneficial to students, campus administrators say.

But that doesn't make the topic easier for some schools to discuss.

Officials at St. Bonaventure University were unavailable last week to comment on the Rigas Family Theater, housed in an arts center on the upstate New York campus. The theater stems from a gift made in the mid-1990s before John Rigas, founder of Adelphia Cable Co., was convicted of conspiracy and fraud in an alleged plan to loot the cable company of millions of dollars.

Likewise, Seton Hall University in South Orange, N.J., did not address an inquiry about Kozlowski Hall, dedicated in 1997 for an alum who, a few years later, would become infamous -- former Tyco Chairman L. Dennis Kozlowski, now accused of bilking vast sums from the company.

William Frederick, author of several books on corporate ethics, isn't surprised by the silence from campuses.

"They don't want to say anything harsh about a donation that's being discussed because they don't want to alienate future donors," he said. "Secondly, they are simply embarrassed."

And something they have in common with businesses, he said, may continue to leave them vulnerable.

"Universities are tied up in the same kind of growth mania that corporations are. They're awfully eager to get money," said Frederick, an emeritus professor of business administration at the University of Pittsburgh.

"It's quite possible in the past, maybe less so in the future, that they have not been careful to ask about the source of the contribution," he said.

Still, it's not as if a school can do an FBI investigation each time a donor opens a wallet. "You could spend all kinds of money investigating backgrounds and never come close to ascertaining whether there is some kind of economic fraud," Steinbach said.

"And individuals put under that scrutiny would be offended," he said. "Deeply offended."